Dear horse, wherever you are: The barn door is now closed
Ben (rushing in): This press release idea is great stuff! Shows everyone we're on top of our game! We're solving the mortgage mess! Good job Number One! Assistant 1: No problem, sir. It's good to address these things quickly. Nip them in the bud. Ben (untying scarf from his neck): Agreed. I've always said the Fed is a take-charge organization. Proactive. Always watching out for the financial industry. I mean system. Watching out for the financial system. Asst 1: Right sir. Although this press release is about the Fed protecting consumers. Protecting them from mortgage fraud and abuse. Ben (removing his goggles): Good idea. I'm against fraud generally. A1: That's great because Congress requires us to do something about mortgage fraud. The law is called HOEPA. Ben: Good grief those congressional folks are busy! When did they pass this WHIPPA? While I was in the helicopter? A1: No sir. It was 1994. And it's HOEPA: Home Owner Equity Protection Act. Ben: Good gravy! Why didn't I get a memo on this? A1: Well, things were going so well. I mean this subprime thing was contained until the steroids thing broke. Ben: Mortgage loans on steroids? No wonder it's such a mess! A1: We can't think of another explanation. Because, you know, it appeared to be contained... Ben: Right, right... Ok, let me look this over. Probably should make a speech about this too. Wait, what's this? "Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan..." Holy cow, son, this requires that loans be made only to people who can afford them... Talk about crimping financial innovation! The Maestro would have blown his top... Who comes up with this stuff? A1: It's a team effort, sir. Ben: Okay, let's see here.... "Creditors would be required to verify the income and assets they rely upon in making a loan." What the heck? Son, we're in a New Financial Era, not the Stone Age. Verifying income! How old school! I suppose you'll require an abacus. What else did you bureaucrats come up with? A1: Well there's this: "Prepayment penalties would only be permitted if certain conditions are met." Ben: Certain conditions? You're going to drain the blood right out of this business, aren't you? The whole mortgage industry is based on fees and penalties. You start taking away a business's prerogative to impose penalties, and the next thing you know you'll want to changed contracted interest rates. A1: Not really my area, sir. I understand someone else is on top of that. Ben: I guess if we're going to be on the forefront of solving this problem, dramatic action is needed. A1: I agree, sir. Like not letting mortgage brokers strong-arm the appraisers into inflating home values? Ben: Inflated appraisals! I'm shocked, shocked to learn about these inflated appraisals. I thought home values inflated themselves! A1: They used to, sir. Ben: Those were heady days, eh Number One? Heady days indeed. Too bad we didn't see these mortgage problems coming. It's as if they came out of nowhere. Like some David Blaine trick. Hey, do you think he's available? A1: Actually Fed Governor Bramlich warned us that the subprime industry was hoodwinking borrowers into mortgages they couldn't afford. And that was almost seven years ago. Ben: Trust me, I can understand how this might have gone unnoticed. I mean the Maestro and all that talking, talking... A1: Well, there's Sheila Blair at Treasury. She tried to get the subprime industry to regulate itself back in 2001. Ben: (tying his scarf): Well, no time like the present! Let's get this press release out to the press where it belongs. With a less fraudulent, more consumer friendly mortgage industry, a new day will dawn for the Ownership Society! A1: Some people are calling it the "Receivership Society." Ben (drawing his goggles down over his eyes): What's that? Look, Number One, handle this press release thing for me. I'll make a speech later. I've got a flying lesson in fifteen minutes. A1: Godspeed, sir. Godspeed. ***
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The Federal Reserve Board on Tuesday proposed and asked for public comment on changes to Regulation Z (Truth in Lending) to protect consumers from unfair or deceptive home mortgage lending and advertising practices. - Federal Reserve Board press release, Dec. 18, 2007